Audit Exam 2 Questions All Solved
Correctly 2026 Updated.
Which of the following individuals would be least likely to be considered a "covered member"
by the independence standard for the audit of Wingo Company performed by a CPA firm with
one office?
a. A staff assistant on the audit
b. A staff assistant who prepares Wingo Company's tax returns
c. A tax partner who performs no attest services for Wingo Company or for any other clients
d. The partner in charge of the CPA firm (she does not work on the Wingo Company audit). -
Answer b. A staff assistant who prepares Wingo Company's tax returns
Auditors may be restricted from holding an investment in a client. This violates which ethical
rule?
a. Objectivity
b. Independence
c. Noncompliance with GAAP
d. Form of organization - Answer b. Independence
Which of the following is not a broad category of safeguards that mitigate or eliminate threats
to independence?
a. Safeguards created by the profession, legislation, or regulation
b. Safeguards created to assure proper training within both the client and attest environment
c. Safeguards implemented by the attest client
d. Safeguards implemented by the firm, including policies and procedures to implement
professional and regulatory requirements - Answer b. Safeguards created to assure proper
training within both the client and attest environment
Under the AICPA Code of Professional Conduct, which of the following rules is not applicable to
CPAs in business?
a. Integrity and objectivity
b. Accounting principles
c. Confidential client information
d. Acts discreditable - Answer c. Confidential client information
Which of the following is most likely to violate PCAOB independence requirements?
a. Accepting audit fees fixed by a public authority
, b. Submitting a competitive bid to a potential audit client
c. Performing professional services relating to judicial proceedings
d. Issuing the current year audit report when fees that the auditor considers to be a significant
amount for the past two years of audits remain uncollected - Answer d. Issuing the current
year audit report when fees that the auditor considers to be a significant amount for the past
two years of audits remain uncollected
When an accountant is not independent, the accountant is precluded from issuing a(n):
a. Preparation report
b. Agreed-upon procedures report
c. Management advisory report
d. Tax planning report - Answer b. Agreed-upon procedures report
The AICPA Code of Professional Conduct states that a CPA shall not disclose any confidential
information obtained in the course of a professional engagement except with the consent of the
client. This rule should be understood to preclude a CPA from responding to an inquiry made by:
a. The trial board of the AICPA
b. An investigative body of a state CPA society
c. A news reporter who is a CPA
c. An AICPA voluntary quality review body - Answer c. A news reporter who is a CPA
A CPA sole practitioner purchased stock in a client corporation and placed it in a trust as an
educational fund for the CPA's minor child. The trust securities were not material to the CPA but
were material to the child's personal net worth. Would the independence of the CPA be
considered to be impaired with respect to the client?
a. Yes, because the stock would be considered a direct financial interest and, consequently,
materiality is not a factor
b. Yes, because the stock would be considered an indirect financial interest that is material to
the CPA's child
c. No, because the CPA would not be considered to have a direct financial interest in the client
d. No, because the CPA would not be considered to have a material indirect financial interest in
the client - Answer a. Yes, because the stock would be considered a direct financial interest
and, consequently, materiality is not a factor
The concept of independence states that CPAs must evaluate whether a situation would
threaten independence when reviewed
a. AICPA ethics examiner
b. Independent third party
c. PCAOB inspector
Correctly 2026 Updated.
Which of the following individuals would be least likely to be considered a "covered member"
by the independence standard for the audit of Wingo Company performed by a CPA firm with
one office?
a. A staff assistant on the audit
b. A staff assistant who prepares Wingo Company's tax returns
c. A tax partner who performs no attest services for Wingo Company or for any other clients
d. The partner in charge of the CPA firm (she does not work on the Wingo Company audit). -
Answer b. A staff assistant who prepares Wingo Company's tax returns
Auditors may be restricted from holding an investment in a client. This violates which ethical
rule?
a. Objectivity
b. Independence
c. Noncompliance with GAAP
d. Form of organization - Answer b. Independence
Which of the following is not a broad category of safeguards that mitigate or eliminate threats
to independence?
a. Safeguards created by the profession, legislation, or regulation
b. Safeguards created to assure proper training within both the client and attest environment
c. Safeguards implemented by the attest client
d. Safeguards implemented by the firm, including policies and procedures to implement
professional and regulatory requirements - Answer b. Safeguards created to assure proper
training within both the client and attest environment
Under the AICPA Code of Professional Conduct, which of the following rules is not applicable to
CPAs in business?
a. Integrity and objectivity
b. Accounting principles
c. Confidential client information
d. Acts discreditable - Answer c. Confidential client information
Which of the following is most likely to violate PCAOB independence requirements?
a. Accepting audit fees fixed by a public authority
, b. Submitting a competitive bid to a potential audit client
c. Performing professional services relating to judicial proceedings
d. Issuing the current year audit report when fees that the auditor considers to be a significant
amount for the past two years of audits remain uncollected - Answer d. Issuing the current
year audit report when fees that the auditor considers to be a significant amount for the past
two years of audits remain uncollected
When an accountant is not independent, the accountant is precluded from issuing a(n):
a. Preparation report
b. Agreed-upon procedures report
c. Management advisory report
d. Tax planning report - Answer b. Agreed-upon procedures report
The AICPA Code of Professional Conduct states that a CPA shall not disclose any confidential
information obtained in the course of a professional engagement except with the consent of the
client. This rule should be understood to preclude a CPA from responding to an inquiry made by:
a. The trial board of the AICPA
b. An investigative body of a state CPA society
c. A news reporter who is a CPA
c. An AICPA voluntary quality review body - Answer c. A news reporter who is a CPA
A CPA sole practitioner purchased stock in a client corporation and placed it in a trust as an
educational fund for the CPA's minor child. The trust securities were not material to the CPA but
were material to the child's personal net worth. Would the independence of the CPA be
considered to be impaired with respect to the client?
a. Yes, because the stock would be considered a direct financial interest and, consequently,
materiality is not a factor
b. Yes, because the stock would be considered an indirect financial interest that is material to
the CPA's child
c. No, because the CPA would not be considered to have a direct financial interest in the client
d. No, because the CPA would not be considered to have a material indirect financial interest in
the client - Answer a. Yes, because the stock would be considered a direct financial interest
and, consequently, materiality is not a factor
The concept of independence states that CPAs must evaluate whether a situation would
threaten independence when reviewed
a. AICPA ethics examiner
b. Independent third party
c. PCAOB inspector
